Mahindra and Mahindra on February 8 reported a mixed bag of earnings for the quarter ended December 2019 with profit declining 72.8 percent YoY due to one-time loss on impairment of investments.
Revenue from operations fell 6 percent, while EBITDA grew 5 percent and margin expanded 160bps YoY.
Auto segment margin during the quarter improved significantly to 7.3 percent from 5.8 percent YoY, while farm equipment margin remained stable at 19.4 percent against 19.1 percent YoY.
Here are the highlights of Mahindra and Mahindra's earnings conference call as compiled by Narnolia Financial Advisors:
Management Participants: Pawan Goenka – MD, VS Parthasarathy – Group CFO & Group CIO
The management expects automotive segment growth to be in-line with industry growth in FY21. Hence, the guidance is of 2-4 percent growth for PV, 4-6 percent for CV and 5 percentYoY for Tractor industry.
The rural demand should pick up based on 8 percent above normal Rabi sowing and increased reservoir levels.
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The BS-VI cost impact is Rs 15,000-20,000 for petrol cars while Rs 50,000-60,000 for diesel cars. The pass through may happen in phases considering the slow-down in the industry.
Ssangyong Motor Corporation (SYMC)
M&M has taken an impairment of Rs 600 crore in Q3FY20. SYMC has also impaired the assets worth KRW 57 billion (Rs 342 crore).
Further the management committee has come up with a turnaround plan for SYMC by 2023.
Needs $450-500 million of investment to be funded through external borrowings, 3rd party and M&M. Half of the investment amount will be utilized in repayment of loans and rest in product development.
The company has already entered in agreement with labour union where the union has agreed to take a hit on their compensation.
The company will look into new export markets such as; Russia and Vietnam.
The new product developed in collaboration with M&M will bring synergies to the organization.
Ford and M&M collaboration
Ford will launch a new product this week while M&M will launch by the end of March 2020.
M&M will utilize Ford’s plant to expand its engine capacity which will lead to a cost saving of Rs 400 crore.
The companies are working on C-SUV platform which will fetch a saving of Rs 1,000 crore if both the companies had developed the platform separately.Timeline of new launches
- Q1FY21: E-KUV, New Thar
- Q2FY21: Atom EV (mass mobility)
- Q4FY21: W-601 (brand new platform)
- Q1FY22: Z-101
- Q2FY22: E-XUV-300
- Q2FY22: K2 platform for tractors where the launches will carry on for next 2 years.
- The fleet segment will grow rapidly going ahead.
- The company is selling 1500 volumes a month (500 Trios and 1000 e-alpha).
- Mahindra Electric is expected to become EBITDA positive in FY21.